IDEAS home Printed from https://ideas.repec.org/p/zbw/faulre/80.html
   My bibliography  Save this paper

Employment adjustment in German firms

Author

Listed:
  • Jung, Sven

Abstract

Using a representative establishment data set for Germany, we show that, in line with the existing literature for several countries, firms' adjustment costs for employment are characterized by a fixed and convex functional form. Furthermore, they are asymmetric with dismissal costs exceeding hiring costs. An analysis of firms' adjustment in the period 1996-2010 also indicates that adjustment behavior has changed over time. Comparing the employment adjustment in the two observed business cycles comprising the years 1996-2003 and 2004-2010, we find that the adjustment speed was higher in the second business cycle indicating that adjustment costs have fallen in recent years.

Suggested Citation

  • Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    • Handle: RePEc:zbw:faulre:80
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/66788/1/730117316.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Felix Fitzroy & Michael Funke, 1998. "Skills, Wages and Employment in East and West Germany," Regional Studies, Taylor & Francis Journals, vol. 32(5), pages 459-467.
    2. Elisabetta LODIGIANI & Sara SALOMONE, 2012. "Migration-induced Transfers of Norms. The case of Female Political Empowerment," LIDAM Discussion Papers IRES 2012001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Cooper, Russell & Haltiwanger, John & Willis, Jonathan L., 2015. "Dynamics of labor demand: Evidence from plant-level observations and aggregate implications," Research in Economics, Elsevier, vol. 69(1), pages 37-50.
    4. Olga Bohachova & Bernhard Boockmann & Claudia M. Buch, 2011. "Labor Demand During the Crisis: What Happened in Germany?," CESifo Working Paper Series 3625, CESifo.
    5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    6. Gerard A. Pfann & Franz C. Palm, 1993. "Asymmetric Adjustment Costs in Non-linear Labour Demand Models for the Netherlands and U.K. Manufacturing Sectors," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(2), pages 397-412.
    7. repec:bla:econom:v:53:y:1986:i:210(s):p:s219-44 is not listed on IDEAS
    8. José Varejão & Pedro Portugal, 2007. "Employment Dynamics and the Structure of Labor Adjustment Costs," Journal of Labor Economics, University of Chicago Press, vol. 25(1), pages 137-165.
    9. Pfann, Gerald A. & Verspagen, Bart, 1989. "The structure of adjustment costs for labour in the Dutch manufacturing sector," Economics Letters, Elsevier, vol. 29(4), pages 365-371.
    10. Michael Rothschild, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(4), pages 605-622.
    11. Flaig Gebhard & Rottmann Horst, 2001. "Input Demand and the Shortand Long-Run Employment Thresholds: An Empirical Analysis for the German Manufacturing Sector," German Economic Review, De Gruyter, vol. 2(4), pages 367-384, December.
    12. Nilsen, Oivind A. & Salvanes, Kjell G. & Schiantarelli, Fabio, 2007. "Employment changes, the structure of adjustment costs, and plant size," European Economic Review, Elsevier, vol. 51(3), pages 577-598, April.
    13. Jaramillo, Fidel & Schiantarelli, Fabio & Sembenelli, Alessandro, 1993. "Are Adjustment Costs for Labor Asymmetric? An Econometric Test on Panel Data for Italy," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 640-648, November.
    14. Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
    15. Uwe Jirjahn, 2010. "Works councils and employment growth in German establishments," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 34(3), pages 475-500.
    16. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    17. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    18. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 381-402.
    19. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    20. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    21. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    22. Matthew D. Shapiro, 1986. "The Dynamic Demand for Capital and Labor," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 513-542.
    23. Paola Rota, 2004. "Estimating Labor Demand with Fixed Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 25-48, February.
    24. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    25. Hirsch, Boris & Schank, Thorsten & Schnabel, Claus, 2009. "Work councils and separations: voice, monopoly, and insurance effects," Discussion Papers 62, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    26. Burda, Michael C., 1991. "Monopolistic competition, costs of adjustment, and the behavior of European manufacturing employment," European Economic Review, Elsevier, vol. 35(1), pages 61-79, January.
    27. Hamermesh, Daniel S, 1989. "Labor Demand and the Structure of Adjustment Costs," American Economic Review, American Economic Association, vol. 79(4), pages 674-689, September.
    28. repec:bla:econom:v:45:y:1978:i:180:p:329-45 is not listed on IDEAS
    29. Hermann Gartner & Sabine Klinger, 2010. "Verbesserte Institutionen für den Arbeitsmarkt in der Wirtschaftskrise," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 90(11), pages 728-734, November.
    30. Merkl, Christian & Wesselbaum, Dennis, 2009. "Extensive vs. intensive margin in Germany and the United States: any differences?," Kiel Working Papers 1563, Kiel Institute for the World Economy (IfW Kiel).
    31. Spermann, Alexander, 2011. "The New Role of Temporary Agency Work in Germany," IZA Discussion Papers 6180, Institute of Labor Economics (IZA).
    32. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    33. Russell Cooper & Jonathan Willis, 2009. "The Cost of Labor Adjustment: Inferences from the Gap," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 632-647, October.
    34. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, October.
    35. Philip Vermeulen, 2006. "Employment stickiness in small manufacturing firms," Computing in Economics and Finance 2006 144, Society for Computational Economics.
    36. Maddala, G.S., 1986. "Disequilibrium, self-selection, and switching models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 28, pages 1633-1688, Elsevier.
    37. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65, Elsevier.
    38. Hamermesh, Daniel S, 1992. "A General Model of Dynamic Labor Demand," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 733-737, November.
    39. Lapatinas, Athanasios, 2009. "Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms," Labour Economics, Elsevier, vol. 16(5), pages 521-533, October.
    40. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
    41. Sergi Jiménez‐Martin, 2006. "Strike Outcomes and Wage Settlements in Spain," LABOUR, CEIS, vol. 20(4), pages 673-698, December.
    42. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    43. Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Chapters, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 59-94, National Bureau of Economic Research, Inc.
    44. Flaig, Gebhard & Steiner, Viktor, 1989. "Stability and Dynamic Properties of Labour Demand in West German Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 395-412, November.
    45. Seifert, Hartmut & Herzog-Stein, Alexander, 2010. "Der Arbeitsmarkt in der Großen Rezession - Bewährte Strategien in neuen Formen," WSI-Mitteilungen, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 63(11), pages 551-559.
    46. Gorter, Cees & Hassink, Wolter H. J. & Russo, Giovanni, 2003. "The structure of hiring and labour market tightness," Economics Letters, Elsevier, vol. 80(1), pages 99-103, July.
    47. repec:bla:scandj:v:85:y:1983:i:2:p:223-38 is not listed on IDEAS
    48. Jennifer Hunt, 2000. "Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany," Economica, London School of Economics and Political Science, vol. 67(266), pages 177-202, May.
    49. Buch, Claudia M. & Lipponer, Alexander, 2010. "Volatile multinationals? Evidence from the labor demand of German firms," Labour Economics, Elsevier, vol. 17(2), pages 345-353, April.
    50. Michael Fritsch & Horst Brezinski (ed.), 1999. "Innovation and Technological Change in Eastern Europe," Books, Edward Elgar Publishing, number 1937.
    51. Manfred Antoni & Elke J. Jahn, 2009. "Do Changes in Regulation Affect Employment Duration in Temporary Help Agencies?," ILR Review, Cornell University, ILR School, vol. 62(2), pages 226-251, January.
    52. Sergi Jiménez-Martín & Jaume Garcia, 2010. "Initial offers and outcomes in wage bargaining: who wins?," Empirical Economics, Springer, vol. 39(3), pages 815-846, December.
    53. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-1044, December.
    54. repec:bla:econom:v:63:y:1996:i:251:p:359-67 is not listed on IDEAS
    55. Benoît Pierre FREYENS, 2010. "Measuring firing costs: The case for direct methods," International Labour Review, International Labour Organization, vol. 149(3), pages 287-313, September.
    56. Emerson, Michael, 1988. "Regulation or deregulation of the labour market : Policy regimes for the recruitment and dismissal of employees in the industrialised countries," European Economic Review, Elsevier, vol. 32(4), pages 775-817, April.
    57. Patricia M. Anderson, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 1015-1042.
    58. Gabriele Fischer & Florian Janik & Dana Müller & Alexandra Schmucker, 2009. "European Data Watch: The IAB Establishment Panel - Things Users Should Know," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(1), pages 133-148.
    59. Chang, Ching-Cheng & Stefanou, Spiro E., 1988. "Specification and estimation of asymmetric adjustment rates for quasi-fixed factors of production," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 145-151, March.
    60. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-137, March.
    61. Holtz-Eakin, Douglas & Rosen, Harvey S, 1991. "Municipal Labor Demand in the Presence of Uncertainty: An Econometric Approach," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 276-293, July.
    62. Stephen Nickell, 1984. "An Investigation of the Determinants of Manufacturing Employment in the United Kingdom," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(4), pages 529-557.
    63. Robert E. Hall, 2004. "Measuring Factor Adjustment Costs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(3), pages 899-927.
    64. Kramarz, Francis & Michaud, Marie-Laure, 2010. "The shape of hiring and separation costs in France," Labour Economics, Elsevier, vol. 17(1), pages 27-37, January.
    65. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    66. John T. Addison & Paulino Teixeira, 2005. "Employment adjustment in two countries with poor reputations: Analysis of aggregate, firm, and flow data for Portugal and Germany," International Economics and Economic Policy, Springer, vol. 1(4), pages 329-348, January.
    67. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70(6), pages 538-538.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    2. Sven Jung, 2014. "Employment adjustment in German firms [Betriebliche Beschäftigungsanpassung in Deutschland]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 83-106, March.
    3. Blatter, Marc & Muehlemann, Samuel & Schenker, Samuel, 2012. "The costs of hiring skilled workers," European Economic Review, Elsevier, vol. 56(1), pages 20-35.
    4. Lapatinas, Athanasios, 2009. "Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms," Labour Economics, Elsevier, vol. 16(5), pages 521-533, October.
    5. Lapatinas Athanasios, 2012. "On the Interrelation of Capital and Labor Adjustment Costs at the Firm Level," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(3), pages 1-36, September.
    6. Oivind A. Nilsen & Joao M. Ejarque, 2007. "Identifying Adjustment Costs of Net and Gross Employment Changes," 2007 Meeting Papers 670, Society for Economic Dynamics.
    7. Yaman, F., 2016. "Structural Estimation of Labor Adjustment Costs," Working Papers 15/22, Department of Economics, City University London.
    8. Jung, Sven, 2014. "Employment adjustment in German firms (Betriebliche Beschäftigungsanpassung in Deutschland)," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 47(1-2), pages 83-106.
    9. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    10. Benoît Pierre FREYENS, 2010. "Measuring firing costs: The case for direct methods," International Labour Review, International Labour Organization, vol. 149(3), pages 287-313, September.
    11. Francine Lafontaine & Jagadeesh Sivadasan, 2009. "Do Labor Market Rigidities Have Microeconomic Effects? Evidence from within the Firm," American Economic Journal: Applied Economics, American Economic Association, vol. 1(2), pages 88-127, April.
    12. Victor Aguirregabiria & Cesar Alonso-Borrego, 2014. "Labor Contracts And Flexibility: Evidence From A Labor Market Reform In Spain," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 930-957, April.
    13. Francisco Cabo & Angel Martín-Román, 2019. "Dynamic collective bargaining and labor adjustment costs," Journal of Economics, Springer, vol. 126(2), pages 103-133, March.
    14. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 889-922, August.
    15. Amil Petrin & Jagadeesh Sivadasan, 2006. "Job Security Does Affect Economic Efficiency: Theory, A New Statistic, and Evidence from Chile," NBER Working Papers 12757, National Bureau of Economic Research, Inc.
    16. Yaman, F., 2011. "The costs of adjusting labor: Evidence from temporally disaggregated data," Working Papers 11/10, Department of Economics, City University London.
    17. Zier, Patrick, 2013. "Econometric impact assessment of the Common Agricultural Policy in East German agriculture," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 71, number 71.
    18. Lucia Foster, 1999. "Employment Adjustment Costs and Establishment Characteristics," Working Papers 99-15, Center for Economic Studies, U.S. Census Bureau.
    19. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 889-922, August.
    20. Caggese, Andrea, 2007. "Testing financing constraints on firm investment using variable capital," Journal of Financial Economics, Elsevier, vol. 86(3), pages 683-723, December.

    More about this item

    Keywords

    adjustment costs; dynamic labor demand; employment adjustment; Germany;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:faulre:80. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/vierlde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.